Investor uncertainty continues in 2007

One in three private investors thinks buy-to-let residential property will provide the best investment returns in 2007, according to research by New Star. This is a 33% increase on the same research conducted in 2005 and highlights UK investors’ growing love affair with buy-to-let residential property.

The research, conducted in association with NMG, surveyed 773 investors from across the UK. They were asked which asset class they thought would perform the best in 2007: residential property, commercial property, UK equities, global equities, bonds or cash.

Almost one in three investors surveyed (32%) did not have a view on what would be the best performing asset class in 2007. Despite two interest rate rises in 2006, 32% of investors thought buy-to-let residential property would perform best in 2007, followed by commercial property (15%), UK equities (6%), bonds (5%), cash (5%) and global equities (5%).

In contrast to this, a separate survey highlighted by New Star shows that financial advisers think equities will perform best in 2007, followed by commercial property, fixed income, residential property and then cash.

Phil Wagstaff, managing director of UK retail sales and marketing at New Star, says; “This research raises a number of issues. It shows the British public’s continued love affair with buy-to-let residential property. Given that residential property prices are forecast to rise only 4% during 2007, this is a cause for concern.

“Commercial property on the other hand was the best performing asset class in 2006 and is forecast to generate healthy total returns again in 2007 – as high as 10.5% for offices and 13.4% for City of London offices, according to the Investment Property Forum.

“The buy-to-let forecast, coupled with investors’ uncertainty over which asset class will perform best, highlights the need for professional advice. New Star always recommends that investors seek professional advice to help find appropriate investments for their individual circumstances and the current investment climate.”